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Strategists at Citi, expect to see another leg lower in equities soon on the back of another leg in peak Fed pricing, which should also help the USD print new highs.
While earnings have been “okay” so far, they outline three reasons why “all is not well in equities.”
All-in-all, equities are likely to revisit the lows as peak Fed pricing moves to new highs. The equity strategists also noted that net short positioning is “much cleaner now relative to 4 weeks ago.”
On the chances of a strong end-of-the-year rally, they added:
“It might seem strange leaning short equities into a period of what has historically exhibited strong seasonal performance. But as noted by Citi quant strategists, the traditional Santa rally has not been delivered when the returns of the first 10 months of the year are negative.”
